Finance teams are entrusted with providing valuable insights, forecasts, and reporting to stakeholders. While finance may not traditionally "own" the data like accounting and business operations teams, they serve as the face of the numbers and are the gatekeepers of financial and operational information that can shape their company's strategic direction. To stay ahead in today's fast-paced business environment, finance teams must prioritize data quality and structure, and become champions of data best practices within their organizations.
Here are some key data best practices for modern finance teams:
Make sure you have enough good, quality data
The adage “garbage in, garbage out” is especially relevant in the context of forecasting and planning for finance teams. Data-based decisions are only valuable if the underlying data is correct and complete. Having enough reliable data is essential for identifying trends, enabling businesses to stay ahead of market shifts and take proactive measures. It helps reduce bias and error, ensuring that the insights derived from the data are more accurate and representative. If the data used in financial models is inaccurate or insufficient in quantity, the forecasts and plans derived from these models will also be fundamentally flawed. This can lead to significant consequences, including making wrong strategic decisions.
Lay the foundation with proper data structure
Having accurate data is essential, but it’s not sufficient on its own. Ensuring that the data is properly categorized for reporting and planning is equally crucial. Since financial data is relied upon by different cross-functional teams for day-to-day operations, these teams should have alignment on dimension names and metric definitions. These dimensions and metrics should also be kept consistent across various software tools to avoid misinterpretation, ensure accuracy, and facilitate smooth data integration. A well-organized data structure enables efficient analysis and interpretation, allowing teams to make informed decisions based on reliable, consistent data.
For example, customer acquisition cost (CAC) is an essential metric for businesses to measure the effectiveness of marketing and sales efforts. The metric helps businesses determine the amount of money spent to acquire a new customer and assess the profitability of their customer base. CAC is calculated as the total cost of sales and marketing efforts divided by the number of new customers acquired over a specific period. ERP and FP&A tools may have inconsistent CAC figures because of different data inputs, data categorization, or time periods used in the calculation, leading to flawed decision-making on where to invest resources in sales and marketing efforts.
In addition, the reality is that operational and financial data is a continual flow, requiring ongoing management and maintenance. For example, a full view of the entire Chart of Accounts is usually not right at Finance’s fingertips despite Finance being held responsible for reporting accuracy. When new General Ledger (GL) accounts are added during each reporting period, they often go unnoticed by finance teams, leading to tie-out issues or incomplete results. With an FP&A tool like Vareto GL Manager, finance teams are automatically notified whenever a new, unmapped GL account is added to actuals — eliminating the need to rely on or bottleneck accounting. Finance can then independently map this new account to the appropriate financial account, ensuring data accuracy and structure.
Bring all data to a single source of truth
Data is often trapped in siloed systems, resulting in significant manual work to organize data to facilitate analysis and interpretation in a timely fashion. This fragmented view of the organization's financial and operational health can harm decision-making processes. A single source of truth fosters accuracy, consistency, and efficiency in decision-making across the whole organization. Instead of debating which are the correct numbers, stakeholders can focus on how to solve the problem. With one common source of truth, all stakeholders can work from the same accurate information. This streamlined approach allows for quicker decision-making and agility.
Leverage automation to do more with less
By leveraging FP&A software integrations with ERP, HRIS, CRM, and other tools to automatically bring those siloed data streams into a unified source of truth, Finance can have a holistic view of company performance. Automation eliminates the time-consuming and error-prone task of manually updating cell references and lookup ranges in spreadsheets as new actuals data rolls in. With automation, finance teams can spend less time compiling data while increasing accuracy, giving them the bandwidth to focus on driving strategic impact instead.
With Vareto, new actuals data is automatically categorized and placed in the right home for budgets vs. actuals analysis and other reporting purposes, eliminating the need for manual, ad-hoc maintenance to ensure accurate representation of the numbers. This shift from manual processes to automation empowers FP&A professionals to increase efficiency and contribute more effectively to their organization's strategic goals.
Ensure access to timely data
As the gatekeeper to the numbers, finance teams must provide accurate and reliable data to key stakeholders, such as management, department leaders, and the Board of Directors, with a tight turnaround. Relying on manual methods of pulling or checking data slows down the process, creates the perception of Finance as a blocker, and detracts from Finance’s credibility. Due to this perception, department teams often find workarounds and leave Finance out of the decision, which ultimately hurts the business in the long run. To better serve business stakeholders efficiently and build trust and transparency, the finance team can leverage FP&A software solutions to offer self-serve access to the latest data needed.
Finance plays an essential role in shaping their organization's strategic direction by leveraging data to make informed decisions. By prioritizing data quality and structure, Finance can build a solid foundation to make the right decisions for the business.
